Faculty of Higher Education

Individual Assignment Cover Sheet

This cover sheet must be submitted with your assignment

STUDENT NAME RANJANA TAMANG

STUDENT NUMBER GCB2170

UNIT CODE HA3021

UNIT NAME
CORPORATIONS LAW
DUE DATE
26/8/2022

DECLARATION

I certify that:
This assignment is my own work.

I have acknowledged and disclosed any assistance received in its preparation

and cited all sources from which data, ideas, words (whether quoted directly or
paraphrased) were taken.

This assignment was prepared specifically for this unit only.

The reference list is truthful and accurate and in Holmes approved referencing
style.

STUDENT SIGNATURE /
NAME

Total Word Count from Q1-Q4

1812

2022HIIACS
Table of Contents
Question No 3.................................................................................................................. 6
Question No 4.................................................................................................................. 8
References.......................................................................................................................9

Question No 3
Whenever the Federal Court ruled against ASIC in ASIC v Citigroup Global Markets
Australia Pty Limited (No 4) [2007] FCA 963, the investment banking industry
heaved a sigh of relief (McCabe, 2007). Citigroup, however, did not provide an
unconditional endorsement of the present proprietary trading activities. Investment
banks providing advice to clients in a takeover scenario should be mindful of the
dangers highlighted here.

According to the Corporations Act 2001, the statutory duties of officers are s181
which is to act honestly, s 180(1)) which is to use care and diligence, s 183 which is
to not misuse information, s 182 which is to not misuse position and s 588G which is
to prevent insolvent trading (Legislation, 2012). The consequences of officer due to
the falling to act appropriately can be sued due to breaching the law. The court can
award the remedy because of the affected party or injured party according to the
given case. However, investment banks should not use Citigroup's win here as a
blanket OK to expand their operations (Austlii, 2022). There are a number of dangers
it draws attention to that the banks need to be aware of. As a result of the Court's
ruling, all three of ASIC's claims that relied on the establishment of a fiduciary
relationship were dismissed. When that happened, ASIC admitted that the parties
had not previously had any kind of fiduciary relationship prior to the execution of the
mandate letter (McCabe, 2007).

Considering that Citigroup had essentially received the commission to act for Toll in
June 2005 (the mandate letter had not been signed until August), it should not be
unexpected that the pre-contractual interactions had a fiduciary nature (Smith, 2022).

2022HIIACS
Citigroup's guidance to Toll upon that takeover, including the logic and virtues of
making a bid for Patrick, its price of something like the offer, and computation of the
premium, all occurred within the context of a professional connection between the
parties prior to the execution of the contract.

This case study is so significant because this case study demonstrates the
consequences of breaching the law of officers and also the involvement of ASIC v
Citigroup which is one of the largest organisation. Citigroup is hardly a blanket
endorsement of the status quo. When properly analyzed, it serves as a warning
about the dangers of the existing practices of investment banks. There were two
reasons why Citigroup avoided punishment. The Australian Securities and
Investments Commission firstly acknowledged that there was no fiduciary connection
between Toll and Citigroup previous to the mandate letter. Since perhaps the Court
recognized all the hallmarks of a fiduciary relationship between counsel and client
inside the pre-contractual discussions between Toll and Citigroup, this seems like an
odd concession. Even if ASIC had shown that a fiduciary connection existed before
the mandate letter, Citigroup might well have prevailed because, given Toll's
familiarity with takeovers and banking operations, Toll impliedly consented to
Citigroup's violation of its obligations. When an investment company consulting on
an acquisition trade in its customer's target's equities, the Court expressly rejected a
position that properly informed permission could well be presumed in all situations.

a) The bank must stipulate in its contract with the customer that it is discharging no
fiduciary responsibilities. This agreement must be signed prior to the bank providing
any advisory services to the customer (ASIC, 2022).

b) The bank may indeed assume the customer fiduciary responsibilities even if the
contract can't be performed at this time (ASIC, 2022). The client's direct or implicit
permission is required for the bank to forgo these obligations.

2022HIIACS
Question No 4
According to the ASIC companies have their own set of responsibilities under the law
since they are considered separate legal entities. The owner must register the
business as a corporation if the owner has concluded that this is the best form of
organization for the company (ASIC, 2012). A corporation is a legal entity used to do
business. Starting business results in the formation of an independent legal entity. It
is crucial to understand the nuances of forming a corporation since the legal,
financial, and record-keeping requirements are distinct from those of other business
forms (ASIC, 2012).

Yes, Seinfeld is responsible for the costs incurred due to buying the property,
ordering the paper, or haggling with the expert (Legislation, 2012). As far as it can be
mentioned that Seinfeld has also gone with the contract and according to (ASIC,
2012) policy, Seinfeld will have to pay all those ordered stationaries.

2022HIIACS
References
Smith, Lionel, PRESCRIPTIVE FIDUCIARY DUTIES (2022)
https://law.uq.edu.au/files/48724/Prescriptive_Fid_Duties.pdf

‘CORPORATIONS ACT 2001 - SECT 1.5.5 Company Directors and Company

Secretaries’, Austlii (2022)
http://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s1.5.5.html

‘Corporations Act 2001’, Legislation (2012)

https://www.legislation.gov.au/Details/C2018C00031

McCabe, Bernard, ‘ASIC v Citigroup and Fiduciary Obligations’, Austlii (2007)

http://classic.austlii.edu.au/au/journals/BondCGeJl/2007/5.pdf

‘Steps to Register a Company | ASIC - Australian Securities and Investments

Commission’, ASIC (2012) https://asic.gov.au/for-business/registering-a-company/steps-
to-register-a-company/

‘Takeovers - Australian Securities and Investments Commission’, ASIC (2022)

https://asic.gov.au/regulatory-resources/takeovers/

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